London (AFP) – Stock markets bounced higher on Tuesday following a huge sell-off, but analysts warned of more turmoil as US President Donald Trump charges ahead in his escalating trade war. After trillions of dollars were wiped from the combined value of global equity markets since last week, share prices across the globe clawed back some ground as investors assessed the possibility of Washington tempering some of the levies.
“Following three days of intense selling, global stock indices bounced back as investors took advantage of lower valuations and grew more optimistic about US tariff negotiations,” said IG analyst Axel Rudolph. Wall Street’s three main indices rose more than three percent at the opening bell, but gave up some of those gains during morning trading. Europe’s main indices finished the day with gains of more than two percent.
European Union chief Ursula von der Leyen warned against escalating a trade conflict during a phone call with Chinese Premier Li Qiang on Tuesday. A rebound in oil prices, which also fell heavily in recent days on recession fears, ran out of steam. Starting Wednesday, US imports of Chinese products will be hit with a 34-percent tariff while EU goods will be taxed 20 percent. Beijing plans to retaliate with its own 34-percent tariff on Thursday while the EU will present its countermeasures as soon as next week. The 27-nation block also plans tariffs of up to 25 percent on US goods in retaliation for levies on steel and aluminium, but it will spare bourbon to shield European wine and spirits from reprisals, according to a document seen by AFP.
– Tokyo rebound –
Tokyo’s stock market closed up more than six percent — recovering much of Monday’s drop — after Japanese Prime Minister Shigeru Ishiba held talks with Trump. The share price of Nippon Steel rallied by around the same amount after Trump launched a review of its proposed takeover of US Steel that was blocked by his predecessor Joe Biden. Hong Kong’s stock market closed up by more than one percent, having plunged more than 13 percent on Monday, its biggest one-day retreat since 1997.
“After multiple punishing sessions, stock markets appear to have started their road to recovery,” noted Russ Mould, investment director at the AJ Bell trading group. He warned, however, that “it’s dangerous to think a massive rally will definitely happen, given how Trump is unpredictable.” Trump said he would impose an additional 50-percent levy on China if Beijing did not heed his warning not to push back against his tariffs. China fired back that it would “never accept” such a move and called the potential escalation “a mistake on top of a mistake.”
– ‘Danger of losing control’ –
The trade war has put the Federal Reserve in the spotlight as economists said escalation could send prices surging. US central bank officials are now having to decide whether to cut interest rates to support the economy, or keep them elevated to keep a lid on inflation. Trade Nation analyst David Morrison said markets have gone from expecting five rate cuts this year to three or four. “This suggests that fears of a tariff-led economic slowdown ‘trump’ those of a tariff-led jump in inflation,” he said.
Morrison warned of a risk of the stock slump resuming if investors lose confidence in the Trump administration’s handling of trade policy. “In the absence of some tariff clarity and defined purpose from the White House, and soon, the Trump administration is in great danger of losing control,” he said. “If markets perceive this, which they are close to doing, then the derisking will continue,” said Morrison, referring to investors selling risk assets such as stocks.
– Key figures around 1530 GMT –
New York – Dow: UP 2.0 percent at 38,713.52 points
New York – S&P 500: UP 2.0 percent at 5,164.28
New York – Nasdaq Composite: UP 2.3 percent at 15,961.46
London – FTSE 100: UP 2.7 percent at 7,910.53 (close)
Paris – CAC 40: UP 2.5 percent at 7,100.42 (close)
Frankfurt – DAX: UP 2.5 percent at 20,280.26 (close)
Tokyo – Nikkei 225: UP 6.0 percent at 33,012.58 (close)
Hong Kong – Hang Seng Index: UP 1.5 percent at 20,127.68 (close)
Shanghai – Composite: UP 1.6 percent at 3,145.55 (close)
Euro/dollar: UP at $1.0912 from $1.0904 on Monday
Pound/dollar: UP at $1.2762 from $1.2723
Dollar/yen: DOWN at 146.97 yen from 147.83 yen
Euro/pound: DOWN at 85.52 pence from 85.68 pence
West Texas Intermediate: DOWN 0.2 percent at $60.60 per barrel
Brent North Sea Crude: DOWN 0.3 percent at $64.02 per barrel
© 2024 AFP
